A Simple Resolution Model for When Family and Business Collide

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A Simple Resolution Model for When Family and Business Collide

fbc diagram

When you’re the leader of a family business you make regular decisions that can have a huge effect on both your business and your family.

Family governance issues pose challenges that other business owners don’t face. When the needs of business and relatives are different, you’re often faced with competing priorities.

But a simple concept in family governance structure can help you sort these priorities and make better decisions for your family business: Maximize opportunities and minimize risk for your business and your family.

A Family Governance Structure You Can Use

Take a look at the illustration. Family and Business are obvious parts of this model, but often overlooked is the role that Ownership plays in family governance.

The leader in each circle of this model plays an important role.

The Family leader’s role is to keep the family itself strong and healthy. The leader is responsible for things like keeping family traditions, or reminding people to stop talking shop at family events. I often refer to the leader of this circle as the Chief Emotional Officer.

The Business circle’s leader must run the business according to the wishes of the ownership group. In a healthy family business, this person runs a professional business where no one is guaranteed a job just because they’re family. This person’s title is often President, CEO, or General Manager.

The leader of the Ownership group must ensure that opportunities are maximized for the family and the business, and that risk is minimized for both. This can mean bringing on a board of directors, hiring the right person to run the business, ensuring the business is amply ensured, and making sure that the needs of the family are understood and met.

This leader is sometimes the head of the family council or a person chosen by the family to lead the owners.

When you get clear about the kind of decision you’re making — Family, Business, or Ownership — you’ll know which circle it belongs in and be able to make better decisions.

Apply the Model

Make a list of the top five concerns in your family business. Put them in the appropriate area on the three-circle model and make the decision from that perspective.

Questions? Get in touch for a 90-minute consultation to help you fully understand the model and how to apply it to your own family business issues:

Sara B. Stern
(612) 220-6559
sara@familybusinessmn.com

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